Earlier this year, Yahoo cut 1,000 jobs, or roughly 7 percent of its workforce. Analysts are calling for Yahoo to cut deeper into its company to try to regain competitiveness. Analyst Henry Blodget suggested Yahoo fire 3,018 employees, more than 20 percent of its current workforce.

While Yahoo is unlikely to fire this many employees, sources close to Yahoo say cuts are coming. According to a Silicon Alley Insider report, sources state that Yahoo is mulling over a new round of job cuts. The cuts would be less than 20 percent, but significant. The site describes, "While our Henry Blodget has called on Yahoo to can 3,018 people (that's more than 20 percent of the workforce), the odds that Yahoo will make cuts on that scale are very low, we're told by people familiar with the company's thinking. But we're also told that another round of layoffs are indeed on the drawing board, prompted by a grim financial forecast."

The cuts may be announced after the third quarter results are predicted October 21. The report is expected to be mixed at best, and may further damage Yahoo's already unstable stock value.

Also bad news for Yahoo is that Sen. Herb Kohl, chairman of the congressional subcommittee on antitrust, competition policy and consumer rights, is pushing the U.S. Department of Justice to examine the Google-Yahoo partnership closely for possible antitrust violations. He sent the DOJ's head a letter Thursday with this request. If the DOJ were to rule that Yahoo could not continue in the pact, it would be devastating, as the deal is really one of the only pieces of good news for the company lately.

Kohl's antitrust committee held its own review of the merger. While its findings were inconclusive, the committee frowned on the deal. In Sen. Kohl's letter he states:

The parties assert the transaction is in the advertisers' best interests since it will create a more efficient marketplace.

While we have conducted a careful review of this transaction, we do not have the benefit of the confidential business information supplied by the companies to the Department nor the economic models necessary to predict consumer behavior...nonetheless, we conclude that important competition issues are raised by this transaction. Should the amount of advertising outsourced by Yahoo to Google grow significantly, we believe the threat to competition will also increase.

The partnership is currently in its final stage of approval by the U.S. Department of Justice. The DOJ may block the deal entirely, or it could only allow it to proceed with strict conditions -- so called "remedies".

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